Suppose that you are a banker responsible for approving corporate loans. Nine firms are seeking secured loans.
Question:
Suppose that you are a banker responsible for approving corporate loans. Nine firms are seeking secured loans. They offer the following assets as collateral:
a. Firm A, a heating oil distributor, offers a tanker load of fuel in transit from the Middle East.
b. Firm B, a wine wholesaler, offers 1,000 cases of Beaujolais Nouveau, located in a warehouse.
c. Firm C, a stationer, offers an account receivable for office supplies sold to the City of New York.
d. Firm D, a bookstore, offers its entire inventory of 15,000 used books.
e. Firm E, a wholesale grocer, offers a boxcar full of bananas.
f. Firm F, an appliance dealer, offers its inventory of electric typewriters.
g. Firm G, a jeweler, offers 100 ounces of gold.
h. Firm H, a government securities dealer, offers its portfolio of Treasury bills.
i. Firm I, a boat builder, offers a half-completed luxury yacht. The yacht will take four months more to complete.
Which of these assets are most likely to be good collateral? Which are likely to be bad collateral?
Explain.
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